May 17 (Reuters) – Gold prices steadied on Wednesday with gains capped by a firmer dollar, as investors fretted over prolonged US debt-limit negotiations.
Spot gold was little changed at USD 1,988.29 per ounce by 0653 GMT. US gold futures steadied at USD 1,992.20.
Rival safe-haven dollar held firm on the day, making gold less appealing for overseas buyers.
Bullion has been well supported on price dips below USD 2,000 and with the debt ceiling “process dragging-on, there is some pent-up frustration in the market which is adversely affecting sentiment”, and that could bring safe-haven flows into gold, Tim Waterer, chief market analyst at KCM Trade said.
US President Joe Biden and top congressional Republican Kevin McCarthy edged closer to a deal to avoid a looming US debt default, as the threat of an economic nightmare prompted Biden to cut short an Asia trip this week.
Bullion slipped from the USD 2,000 level on Tuesday after US retail sales and hawkish remarks from Federal Reserve officials drove bets that interest rate cuts may be delayed.
Higher rates blunt the non-yielding bullion’s appeal.
“Any inflation-fighting rhetoric from Fed officials between now and the June meeting would hinder the gold price,” Waterer further said, adding, the prevailing dollar strength was capping gold’s upside for the time being.
Traders are currently pricing in a 78.6% chance of the U.S. central bank holding rates in June, according to the CME FedWatch tool.
Separately, a resolution of the debt crisis will momentarily see some selling in gold, while in case of a default, “there is no telling how high gold will scream,” said Clifford Bennett, chief economist at ACY Securities.
Among other precious metals, spot silver was flat at USD 23.73 per ounce after hitting a six weeks low in the previous session.
Platinum rose 0.6% to USD 1,063.90 per ounce, and palladium was little changed at USD 1,501.45.
(Reporting by Arundhati Sarkar in Bengaluru; Editing by Sherry Jacob-Phillips, Uttaresh Venkateshwaran, Varun H K and Louise Heavens)
This article originally appeared on reuters.com